Direct:
India's chip program is now committing serious capital to physical plants, and whether the next phase succeeds depends almost entirely on what sits upstream of those plants. Tools, specialty chemicals, process gases, wafers, and design IP are still sourced almost entirely from abroad. ISM 2.0, announced in the Union Budget 2026-27, is the government pointing money at exactly that gap.
The buildout itself is not in doubt. Under ISM 1.0 (₹76,000 crore outlay, up to 50% fiscal support) ten projects worth roughly ₹1.6 lakh crore have been approved across six states, two fabs and eight packaging lines. Tata Electronics signed an MoU with ASML (ASML) on May 16 to equip its $11B, 50,000-wafer-per-month 300mm fab in Dholera, with Powerchip (6770.TW) licensing the 28nm-to-110nm process nodes and first output targeted for late 2026. PM Modi inaugurated Kaynes Technology's (KAYNES.NS) Sanand OSAT in March, and it has already shipped India's first commercially packaged multi-chip module. Micron (MU) is packaging memory at its own Sanand ATMP. Among these, only the packaging operations at Micron and Kaynes are in commercial production today. The wafer fabs are still being built and tooled.
What ISM 2.0 changes is the target. The new mission funds equipment and materials production, full-stack domestic design IP, and supplier-base development instead of another round of fab subsidies, with a stated goal of designing and making 70-75% of India's chips at home by 2029. A fab that still imports its tools, gases, wafers, and design stack is capturing the thinnest slice of the chain, and the refocus reads as New Delhi conceding that point.
The data center wave runs on the same logic and carries the same risk. Roughly 3.5 GW has been announced since early 2025, led by Google's (GOOGL) $15B Visakhapatnam hub, Adani's renewable hyperscale platform, and OpenAI's 100MW deal with Tata. Announced gigawatts are the easy part. Converting them to operational capacity on schedule is where these projects get judged, and the fab side faces the identical test. The number worth watching is how much of each fab's bill of materials India can actually source at home. Right now very little of it is.
Drafted with AI assistance against parallel reporting.
Sources:
- DigiTimes, “India roundup: India accelerates chip ambitions, but ecosystem gaps remain a key challenge” (May 22, 2026, paywalled stub: headline and lead only)
- DigiTimes, “Five weak links India Semiconductor Mission 2.0 must fix” (May 21, 2026, paywalled stub)
- Press Information Bureau (Government of India), “India Semiconductor Mission 2.0” (Feb 2026)
- Tom's Hardware, “ASML to equip India's first commercial chip fab: $11 billion Dholera project targets 50,000 wafers a month” (May 2026)
- Tata Electronics, “Tata Electronics and ASML Announce Strategic Partnership” press release (May 16, 2026)
- Outlook Business, “Kaynes Semicon Ships India's First Commercially Packaged Multi-Chip Module to US Firm AOS” (Apr 2026)
- KNN India, “10 Semicon Projects Approved Across States, Rs 1.6 Lakh Crore Investment Proposed” (May 2026)
- CRN Asia, “India's AI data centre boom is real, but execution, not announcements, will decide outcomes” (2026)
- TechCrunch, “OpenAI taps Tata for 100MW AI data center capacity in India, eyes 1GW” (Feb 18, 2026)
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